Presentation on Marketing

(channel Design Decision, Channel Management Decisions And Marketing

Logistics)

Presenters:
Rakshak Shrestha
Rachana Dhakal
Sandeep Adhikari

Contents
Channel Design Decisions
Channel Designs for Consumer Products
Channel Designs for Industrial Products
Channel Management Decisions
Marketing Logistics

Channel Design Decisions

Channel structure is a combination of channel components and channel

levels.
Channel structure for consumer products and industrial products are

different.
Types of channel component also differs between the two types of

products.
Types of channel design:
Channel Design for Consumer Products
Channel Designs for industrial Products

Channel Designs for Consumer

Products
Channel Participants
1. Producers
. Producers of consumer products are manufacturers,

processors and assembler who gather factors of production

to make product to be used by individuals and households.
. Many small producers perform all the distribution functions

and directly deal with the consumer, while some

manufacturers also maintain their own distribution networks.

Contd
2. Agents
. Generally works for the principal, and negotiate the sales or purchase

transaction on behalf of the principal.

. Normally work on a commission on sales basis and do not take title to

the goods they handle.

. Usually make profits from commissions or fees paid for the services

they provide to the producer and user.

. Sales agents have full authority to negotiate the deal on behalf of the

producer.

Contd
3. Wholesaler
. Are merchants who normally buy from several producers and

sell to a large number of retailers and other institutional

customers.
. There are different types of wholesale establishments who

differ in terms of merchandise they handle.

. Also perform storing, promotion & credit extension functions

in the channel system.

Contd
4. Retailer
. They buy merchandise from the producers and wholesalers and

sell them to consumers.

. The retailer sell the products, that they purchase, directly to the

end user for a profit.

. They also take full title to the merchandise they handle and

also perform storing, promotion and credit extension functions

to a limited level.

Channel Designs for Industrial

Products
Channel Participants
1. Producers
. They can be of various types depending upon the type of product involved.
. In case of capital goods, accessory equipment and parts they are mostly

manufacturers.
. In case of raw materials, such as oil and minerals, they are mostly mining

companies.
. Farmers are producers for most of the agricultural products.

Contd
2. Industrial users
. They are the manufactures, professors, assemblers or institutions

that use the products for business or institutional purposes.

. Industrial users may use the industrial products to manufacturer

other products or provide services to consumers or institutions

through the use of the products.
. Industrial users include manufacturers, public utilities ,

government, airlines, hotels, hospitals etc.

Contd
3. Industrial distributors
.They are wholesale establishments that purchase industrial

products from producers and sell them to industrial users.

.Most industrial distributors deal on a product line and maintain

a full fledged marketing service including a large sales-force,

product delivery systems, information systems.

Contd
4. Agents
.Their functions and method of operations in the industrial

marketing channel are similar to consumer marketing channels.

.They neither take ownership nor are involved in the physical

movement of the products.

.They serve as a link between the producer and the industrial

user.

Channel Management Decisions

Management of channel Dynamics
The channel system is dynamic.
There are two types of dynamism in the channel system
1. Behavioural Dynamism
2. Structural Dynamism

1. Behavioural Dynamism
It refers to the change in role and power relationships in the

channel structures resulting in cooperation and conflicts

among the channel members.
It is a result out of a transfer of channel role, power and
leadership positions in the channel systems.
A. Channel Role
.Channel roles are the sets of activities or behaviours

assigned to each intermediary in a channel system.

.The channel system operates efficiently only if all
participants perform their role without changing their
respective positions.

Contd
B. Channel Power
.Channel power results out of the control exercised by the channel participants

and the leadership position of a participants in the channel system.

.The channel leader exercises its authority and power in order to achieve control

over the channel system.

.Channel power may emerge from any five source:
Reward
Coercion
Referent Power
Expert Power
Legitimate Power

Contd
C. Channel conflicts
. Conflict can be caused by unfair manufacturer policies.
. Cross selling to make small profits has become a nuisance
and cause of horizontal conflict in Nepalese market.
. Conflicts arise mainly due to the following factors: Goal

incompatibility, Role incongruence, Communication

gap, Perceptual differences, Ideological differences.
. Problem Solving, Bargaining, Politics and persuasion are the

methods for resolution of the channel conflict.

2. Structural Dynamism
A conventional channel system is vertically organized in a hierarchy of levels,

such as producer wholesaler retailer structure.

This has resulted in the formation of new channel systems through vertical and
horizontal integration.

A.Vertically integrated channel systems

.This integration is achieved through combining two or more channel

hierarchies under one management and control.

.The combination may be acquired through a purchase or acquiring

the operations of a channel member by another channel member.

.Vertical integration has resulted into three forms of new channel

structures: corporate vertical, contractual vertical and administered

vertical marketing system.

Contd
B. Horizontally integrated channel system
.This is achieved through combining activities of channel

participants working at the same level of channel hierarchy.

.Such combination may be achieved at the level of

manufacturers or service providers, wholesalers and retailers.

.Horizontal integration is mostly achieved through

contractual agreements.

Contd..
C. Multi-channel or hybrid marketing system
. In this system, an organization uses several channel structures
to reach different market segments.
.Multi-channel marketing runs into problem if all channel

structures try to sell the product to sell the same consumer

groups.

Marketing Logistics
Concept and Nature
It is concerned with the management of flow of goods from the

point of origin to the point of consumption.

Physical distribution functions have been performed by all
productive enterprises through the ages.
In the 2nd world war, the military logistics played important
part in the victory of allied forces. Encouraged by this
example, business organizations realized the importance of
logistics and embraced physical distribution as a competitive
tool in marketing.

Objectives of marketing logistics

Is to provide a better customer service at the minimum total

distribution costs.
It manages a cost trade-off between various physical
distribution costs to provide a reliable product movement
system without affecting the level of customer service.

Major Logistics Functions

There are five major components of marketing logistics. They
are:
Transportation

Warehousing
Inventory control
Material handling
Order processing

Transportation
Transportation is the major tools for creating place utility on products.
It moves products from the point of origin to point of consumption.
An organization may have three options for the development of the

transportation capabilities.
Option 1: The organization may maintain its own private fleet of vehicles to

provide the movement of products. This option requires heavy investments in

equipment and personnel and is also perceived to be difficult to manage.
Option 2: The organization may use private transports on a job or long-term
contract basis. These contract carries are specialists and provide efficient and
professional transport service.
Option 3: The organization may use common carriers that offers point to point
movement of products under specified charges.

The major modes of transports available for a marketers are: road, air,

railway and sea.

The various means of transports offer varying level of costs, speed,
consistency and product safety.

Warehousing
Warehouse is a fixed facility in which products are stored until

demand arises for them in the market.

The distribution warehouses stores products for a minimum of
time before they are delivered to the target markets.
The physical distribution(PD) manager needs to take four
major warehousing decision: use of private or public
warehouse, determining the number of warehouses, location of
the warehouses, and use of third-party logistics.

Inventory management and control

Is concerned with developing a system of maintaining an adequate level of

product assortments to meet the customers demand.

Inventory planning is highly essential as shortages of products normally result in
customer disappointments, and hence a lower level of customer servicing.
Inventory managers deal with issues, such as when to reorder and in what
quantity to reorder. Factors that affect the reorder point:
1. The re-order point: The reorder point is the inventory level that signals
that more inventories should be ordered.
a. The anticipation time between the date of reorder and date of delivery.
b. The rate at which the products are sold and consumed.
c. The level of safety stock on hand or the inventory level maintained in
order to prevent stock outs.
2. The reorder quantity: The reorder quantity refers to the quantity of a
specific product item that needs to be replenished to meet the market
demand. The EOQ model specifies the order size that minimizes the total
cost of ordering and carrying inventories.

Material Handling
Material handling of products is closely associated with

warehousing since most of the work of physical transfer is

performed within the warehouse.
They are designed to enhanced the usable capacity of a
warehouse, reduce number of times the products are handled,
and improve the customer service and satisfaction factor.
Physical handling can be mechanical as well as nonmechanical.
In mechanical handling fork-lift trucks, cranes and conveyor
belts are used in order to move products.
In non-mechanical handling, human labor is used.

Order Processing
Is the receipt and transmissions of sales order information.
Is an important distribution function as its efficiency may result

in better customer satisfaction, repeat orders and higher profit

levels.
The order processing involves three major tasks:

Order entry
Order handling
Order delivery

Integrated Logistics Management

This concept is based on the idea that the twin objectives of

providing better customer services and cost minimization can

be achieved only by integrating all logistics functions through
an internal team work with good coordination with channel
members and other agencies involved.
This strategy is based on the following ILM activities:
a.
b.
c.

Cross-functional teamwork
Channel partnership
Proactive distribution

Thank You!